Micro Devices and Sony Plan Chip Venture

Advanced Micro Devices, one of the leading U.S. makers of semiconductors, said Wednesday that it will jointly develop, produce and market “next generation” integrated circuits with Sony Corp. of Japan.

The agreement, which is expected to be made final in three to six months, calls for the widest-ranging program to date between a domestic chip maker and a Japanese consumer electronics conglomerate.

Sunnyvale, Calif.-based AMD declined to disclose the kind of integrated circuits the program is targeting, but analysts speculated that the two companies might be working to design and manufacture new chips for use in telecommunications or graphics-oriented products. Some suggested that AMD’s advanced technology would lend itself to newer, more compact and powerful chips for digital television; digital TV is expected to become a major factor in consumer electronics by the end of the decade.

Semiconductors, tiny electronic components that store and manipulate information, are vital components in appliances such as dishwashers and miniature radios as well as in computers and a whole range of electronically controlled products.

In a statement, AMD said: “The two companies plan to develop and adopt common specifications for design and fabrication of very large scale integration circuits that will allow them to jointly design products” for use by both companies and for sale to other customers.

Benchmark Agreement

The agreement is viewed by semiconductor industry analysts as a benchmark in the trend for semiconductor makers to fashion closer links with their customers. Previous agreements primarily have entailed licensing arrangements to allow one company to manufacture and market the other company’s proprietary products.

Another announcement on Wednesday also highlighted the trend: National Semiconductor said it had signed a long-term agreement with Xerox’s electronics division to exchange technology and expertise in the development of application-specific integrated circuits.

But a plus for AMD in its pact with Sony is increased access to the Japanese market for chips, which has grown in importance as Japanese companies have increased their shares of worldwide sales in consumer electronics and computer systems.

In the statement, AMD President W. J. Sanders cited the high cost of developing technology and said: “This agreement will help AMD maximize return on our investment . . . by extending our participation in very large scale integration products into the consumer markets.”

Licensing Arrangements

The agreement between AMD and Sony also may call for licensing arrangements giving each company the right to manufacture and sell products developed by the other, AMD spokesman Andy Rothman said. Such arrangements might result in products within a year.

However, Rothman said, it could be as long as two years before the arrangement will yield its first jointly developed products.

Daniel Klesken, semiconductor analyst at Montgomery Securities, a San Francisco-based investment banking firm, said the arrangement “has great significance in linking a leading American semiconductor company and a very important Japanese manufacturer. It shows there’s a willingness to cooperate for mutual benefit rather than to be combative.”